Important Update Regarding Private Placements and Limited Offerings Being Sold in New York

January 6, 2021

In December, the New York Attorney General announced new rules and guidance regarding securities issuers and offerings.  The most notable for private placements and limited offerings is the clarification that such offerings being sold in New York must comply with notice filing requirements.  In the new guidance, New York expressly rejects the position held by the Business Law Section of the New York State Bar that offerings made pursuant to Section 4(a)(2) of the U.S. Securities Act of 1933 (the Act) and Rule 506 are not offering or selling to the public and therefore not covered under the Martin Act, exempting such offerings from New York filing requirements.  Under the new rules and guidance, New York has clarified and affirmed its previous unofficial position that the Martin Act regulates dealers of securities being sold in New York, not necessarily the offerings themselves, and as such is exempt from the preemption of Section 18 of the Act.  Prior to these new rules, New York required all issuers to register but permitted issuers to file a Form D and Form 99 in lieu of full dealer registration requirements.  The new rules announced by Attorney General James last month, simplify and align New York’s filing procedures with many other states’ notice filing requirements.  Under the new rules, an offering being sold in New York must make a notice filing electronically via the North American Securities Administrators Association Electronic Filing Depository (EFD).  This simplification eliminates the requirements to submit an originally signed Form 99, an originally signed and notarized U-2, the State Notice and Further State Notice, and corresponding filing fees of each.  After December 2, 2020, an issuer need only electronically file the Form D and submit payment via EFD. 

New York explicitly states in its Assessment of Public Comment on Proposed Changes to 13 NYCRR 10, that “compliance with New York’s filing requirements for Federally Covered Regulation D Securities Dealers is mandatory, not voluntary.  Failure to make required filings under GBL § 359-e and 13 NYCRR 10 will subject the delinquent filer to liability prescribed under the law.”  Those issuers who previously filed a Form D and Form 99, may rely on those filings (amending as required) until December 2, 2024.  Those issuers who have not previously filed, may strongly consider filing in compliance with these new rules.

Filing Requirements

New York now requires a mandatory Form D submission through EFD for initial offerings and annual filings for continuing offerings (or sooner if a Form D amendment is filed with the SEC).  The notice filing fees range from $300-$1,200.  The good news is the notice filing fee is good for four years assuming no changes or amendments are made.  If an amendment is required and filed, an amendment fee of $30 will be charged.  The notice filing and fee must be renewed every four years for continuing offerings.  

Agile Legal provides private funds with federal and state compliance support.  For questions about how these changes may impact your current filing practices or for assistance, please contact Agile Legal today.